PIRA Energy Group Releases Its Oil Market Update for the Week Ending March 23

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Oil supply-demand fundamentals are relatively weak, but prices remain strong on the back of non-fundamental factors.

PIRA Energy Group
PIRA's market insight and expertise in analyzing short-, medium- and long-term global energy markets can be of enormous value to analysts, traders, fuel purchasers, strategic thinkers, and financial planners concerned about energy markets.

NYC-based PIRA Energy Group believes that oil market fundamentals are relatively weak, as is typical for this time of year, but non-fundamental factors are supporting prices, such as the loss of Iranian export volumes to sanctions. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:

*Oil market supply-demand fundamentals are relatively weak, as is typical for this time of year. In addition, DOE data for the week ending March 16 were not exactly bullish, with an overall inventory increase as product stocks built by more than crude stocks. Furthermore, recently there has been heavy jawboning by the U.S., U.K., and Saudi Arabia to drive prices lower. Yet front month Brent prices are still close to recent highs, suggesting underlying factors are supporting prices, namely the loss of Iranian export volumes and continued fear of an Israeli attack on Iran.

*Japanese Product Stocks Post a Second Build. In Japan, finished product stocks posted their second straight weekly build of the year in the week ending March 17, but inventory levels remain low. Crude stocks eased and are near the middle of the four-year range. Refinery runs are expected to rise irregularly through March and April as several refineries come back online. Turnarounds will begin ramping up in May, tempering runs.

*In the U.S. arbitrage hedging activity, rather than fundamentals, is sustaining propane prices. Relatively firm oil and especially gasoline prices also help support the propane complex. In Europe and Asia, the arrival of arbitrage tons in the East has eased pressures on the prompt market, as has the abrupt end of the heating season.

*U.S. ethanol prices rose on the week ending March 16, following higher corn costs and increased demand in gasoline blending. Cash manufacturing margins remained steady, but are very low by historical standards, partially due to the near-record inventories. Brazilian ethanol prices rose in local currency, but declined in dollar terms due to exchange rate movements.

*U.S. ethanol production was stable last week, rising just 1 MB/D to 893 MB/D. Stocks rose by 670 thousand barrels to a new record of 22.7 million barrels. PADD I inventories reached record levels for the third consecutive week, while PADD II stocks are their highest since March 2011. The output of ethanol-blended gasoline fell to 8.068 MMB/D from 8.160 MMB/D the previous week, as total gasoline production declined. The percentage of ethanol-blended gasoline rose to a near record level as the incentive to blend remained high.

*Political risks led by the Iranian situation and developments in the Middle East, Sudan, and Nigeria will continue to support prices this week, despite plans for Iranian nuclear talks.

For Additional Information

The information above is part of PIRA Energy Group's weekly Energy Market Recap, which alerts readers to PIRA’s current analysis of energy markets around the world as well as the key economic and political factors driving those markets.

PIRA Energy Group
3 Park Avenue, 26th Floor
New York, NY 10016
212-686-6808
sales(at)pira(dot)com

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